EDGE tax credit program the centerpiece of Quinn's economic development efforts

Tuesday

Nov 12, 2013 at 8:00 AM

Gov. Pat Quinn's administration has doled out more than $527 million in tax breaks to businesses in a program that's effectiveness has been called into question by both conservatives and liberals alike.

By SCOTT REEDERSpecial to the Times

Gov. Pat Quinn's administration has doled out more than $527 million in tax breaks to businesses in a program that's effectiveness has been called into question by both conservatives and liberals alike.

The EDGE tax credit program is a centerpiece of Quinn's economic development efforts. It allows certain businesses tax breaks in exchange for creating or retaining jobs.

"The problem with this program is, the numbers are squishy," said Greg LeRoy, executive director of Good Jobs First, a liberal think tank based in Washington, D.C. "Unless you actually know what's going on within the mind of a corporate CEO or the members of a corporate board, how on earth would you actually know if jobs were going to leave Illinois if they don't receive a tax break?"

Participation in the EDGE program is limited to companies that can show that they have viable offers to move to other states, said Dave Roeder, spokesman for Illinois Department of Commerce and Economic Opportunity.

"The purpose is create and retain jobs that we already have," he said. "Other states can be very aggressive in their offers to companies. There is never an attempt to match dollar for dollar. We know that there are a lot of issues that make Illinois attractive to companies wanting to be here."

The Quinn administration contends that the EDGE tax program has created 17,840 jobs and retained 43,988 during the governor's time in office.

A full list of all companies that have received EDGE tax credits under Quinn can be viewed at ilnews.org.

In most instances, the way the EDGE tax credit works is participating businesses are given credits for jobs created or retained and those credits can be applied against the company's annual income tax bill.

However, the Illinois General Assembly has broadened the program to accommodate larger corporations such as Continental Tire and Sears. These corporations not only can apply the tax credits against their own tax bills, but also against the state income tax withholdings of their employees.

In these instances, employers essentially keep the income tax withholdings that ordinarily would go into state coffers. That program has been by dubbed by state staffers as "special edge."

State lawmakers are considering broadening the number of businesses eligible for "special edge." Bills that would give a broadened tax break to Archer Daniels Midland and Office Depot are pending before the General Assembly.

State Rep. Jeanne Ives, R-Wheaton, believes the EDGE program creates an unlevel playing field for competing businesses, but is pushing for a measure to allow all businesses participating in the EDGE program to be able to apply the credits against employee withholdings as well as their corporate income taxes.

"Short of true tax reform, this seems like the best we can do," she said.

Dean Stansel, an economics professor at Florida Gulf Coast University in Ft. Myers, Fla., has studied business subsidies extensively.

He contends that programs such as EDGE are misleading in the number of jobs they create or retain.

"Voters, the news media and everyone else should be skeptical - very skeptical - of these numbers," Stansel said. "And here is why: these subsidies create an un-level playing field. We can see the jobs created by these subsidies but what we don't see are the job lost by the competitors - or jobs lost by other businesses because they are paying more in taxes than they should to pay for these subsidies."

But Roeder said on average companies participating in the Edge program create 2.5 times as many jobs as they promise and invest $8 of their own money for every dollar in tax credits they receive. He added if a company does not meet its job goals it cannot claim the tax credit.

But Stansel said the best way to promote economic development is to promote a better business climate for all businesses through lower taxes and fewer regulations.

"Politicians love these types of programs because they can point to the jobs they created," he said. "But the problem is it's hard to measure the jobs lost through higher taxes paid by other businesses that pay for these programs."

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